Archive for the ‘EY’ Category

This post about Ernst & Young’s aggressive tax advice to audit client Wal-Mart was originally posted October 29, 2007. It’s worth everyone – I’m talking to you SEC and PCAOB – taking another look at this given Wal-Mart’s new Mexican bribery problems and the SEC investigation of Ernst & Young for tax lobbying to audit clients. (Ernst & Young has been silent and left out of most media discussion about Wal-Mart’s FCPA problems in Mexico and elsewhere.)

You have to go outside of the US to see a trial of a Big Four audit firm to know what I’m talking about. Australia’s Centro case against PwC or Canada’s Nortel case where Deloitte partners testified recently tell you everything you need to know about why the Big Four will settle every time. Rather than have a jury and the public hear and see the pathetic state of the audit profession, its inability to stop executives who want to cheat, and its unwillingness to acknowledge liability as a firm when it screws up, the firms will reach into their seemingly bottomless pockets and pay up.

I was the first to report on December 6 the irony of Deloitte having been selected by, of all banks, JP Morgan Chase. The high likelihood of a conflict between the bank and the audit firm, and possibly the individual Deloitte partners assigned to the JP Morgan Chase review, should have been obvious to anyone at the OCC. It turns out I was right.

Thank goodness for the plaintiffs’ bar and class action lawsuits. And state attorneys general. Without them, there’d be very little justice yet – or compensation – for any of the mortgage-related fraud perpetrated during the real estate bubble.

Ever wondered what it would be like to see your name in print? Most auditors do not aspire to seeing their name in the papers. It’s a career-limiting move to be cited in a bankruptcy examiner’s report or a disciplinary order issued by the PCAOB.

I’d be exaggerating if I told you the Lehman bankruptcy examiner’s report, and its scathing indictment of Ernst & Young’s role in the biggest failure on Wall Street, answered my prayers. On the contrary. The more successful a fraud case is against Lehman’s executives, the less likely EY or any of its partners will suffer any consequences for their role in the Lehman fraud.

It was a great first day yesterday. I’ve been telling Matt Kelly, Editor of Compliance Week, that this year is better than ever. One profound change is the Twitter presence this year. Last year I was the only one Twittering, Matt did not yet have blogs on the Compliance Week site, and fewer people knew or cared what I was doing or why. This year, I share the front row at every presentation (and the backchannel) with several bloggers/Twitterers.

Dennis believes that I’m betting on PwC as next to fail. I don’t honestly remember committing to that, but I’m willing to go with it for the sake of argument. This is in spite of the fact that the other Big 4 have plenty to worry about and the next tier firms are in no way ready for prime time.

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Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com